Budget Kabuki

It’s November, which means Thanksgiving; the New York Giants playing lousy football in preparation for a Super Bowl run; and NCUA releasing its budget to howls of outrage by the industry. This year is, of course, no exception.

In case you missed it, at its board meeting yesterday NCUA announced a 2013 budget of $251.4 million to fund its activities, representing a 6.1% increase over last year’s budget. NCUA also projected a NCUSIF premium range between zero to 5 basis points in 2013 and a Stabilization Fund assessment range of 8 to 11 basis points.

I would love to say that I am outraged by a 6% budget increase in a time of continued fiscal austerity but in truth I have no idea whether this is a good or bad budget and no easy way of figuring it out. More importantly, neither do the credit unions that pay NCUA’s bill.

For example, NCUA points out that it is not increasing staff levels in 2013. This could mean that NCUA is doing all it can to hold down costs but doing so consistent with its overriding responsibility of maintaining safety and soundness. Then again, it could mean that NCUA could actually be cutting back staff if it was not increasing its oversight of state-chartered institutions, which already have primary regulators.

More than $12 million of the $14 million increase in NCUA’s budget for 2013 is accounted for by a potential 7.5% pay increase for its employees who have been subject to a pay freeze. Who negotiated the contract? Are the increases comparable to what the employees of other financial regulators are receiving? It’s one thing to point to a collective bargaining agreement requiring a large pay increase; it is quite another to help negotiate that increase.

Even allowing for the fact that there are those among us who will think any extra dollar spent by NCUA is a dollar too many, NCUA would actually be doing itself a favor by opening up the budget process to more scrutiny and I have just the way to do it. Why not put the proposed budget out for a 60-day public comment period the same way NCUA puts out a proposed regulation? Just as it provides a section-by-section justification of its proposed regulations, it could provide a justification of its budgetary proposals.

Both sides would benefit from a more informed discussion and a publicly scrutinized budget. Knowing that its spending plan will be made available for public inspection over a two-month period it would be in NCUA’s interest to explain how it arrived at its numbers. Credit unions would have to put up or shut up. In comment letters they could either make suggested improvements or implicitly concede that NCUA’s spending plans are reasonable under the circumstances. My guess is that NCUA’s final product would be improved and that credit unions would see that steep spending cuts aren’t realistic.

By the way the Giants have a bye this week. They should just forfeit the entire month of November and get ready for another dramatic Super Bowl run.